It may sometimes be necessary to update the value of an inventory item to include shipping, handling or other charges. (The result will be the full replacement cost.) Whether or not this is necessary is a question that should be answered by your accounting professional. This note addresses how to implement the update.
To apply expenses (freight, handling, etc.) to the inventory item, follow the 2 steps below:
Adjust Inventory
Open the Adjust Inventory window
Enter the Item Number and Location (if used)
Leave Quantity and Unit Cost blank
Enter the amount of the Expense in the Amount field
Enter the same Inventory Asset Account that is associated with the item (Inventory Asset Account field of the Item Profile)
Enter a meaningful memo in the Memo field
Record
Transfer the expense to the asset account
Open the Record Journal Entry window
Indicate the Expense Account in the Account field
Indicate a Credit of the expense amount
On the next line, indicate the Inventory Asset Account in the Account field
Indicate the expense amount in the Debit field
Enter a meaningful memo in the Memo field
Record
The result will be an increase of inventory value and average cost of the item, and an increase in the Inventory Asset account by reducing the expense in the Expense account. The change will be reflected on both the Profit & Loss (by reducing the expense), and the Balance Sheet (by increasing the amount of the Inventory Asset Account).